Luxury retailers adapt to mobile age

By Paul O'Donnell, CNBC.com

Luxury retailers inhabit an elegantly lit world of richly paneled walls, sleek stone floors and plush goods. For them and their upscale customers, digital commerce is a foreign land, full of flashing offers prompting consumers to download a — gasp! — printable coupon.

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Slowly, however, high-end merchants like Neiman Marcus and luxury brands like Burberry and Stella McCartney are adapting to the new virtual shopping scene, incorporating mobile apps, "augmented reality" and iPad link-ups that extend, rather than sully, the plush experience of their stores.

Last month Neiman-Marcus introduced a pilot program called NM Service, an app that lets shoppers know which of their favorite clerks are on the floor when they arrive. The app can also be used to make appointments remotely with salespeople or pick out the items that interest them before they get to the store.

Neiman's new mobile strategy, which imitates a system long available at Apple stores, is being praised as a cutting-edge move for a luxury retailer into SoLoMo marketing — social, local and mobile. "The consumer these days is a moving target," says Scott Forshay, strategist for mobile and emerging technologies for Acquity Group in Austin, Texas. "How do we engage them while they are out there in the world?"

It's a difficult question for a sector that is used to making its sales by luring customers into its opulent, carefully controlled environments. Even as the rest of the public has shifted its buying online, high-end brands have been insulated from technology trends by their relatively older, late-adopting demographic.

But ignoring the tech revolution is a luxury, so to speak, upscale brands can no longer afford. A study conducted earlier this year by The Luxury Institute showed that 60% of high net worth individuals own smartphones, and of those, 67% used them to shop. 80% had downloaded an app.

And that's just the Boomers, who make the bulk of expensive purchases today. The fastest growing segment of affluent shoppers are the group that marketers call the Millennials. Now in their early 20s, they are known for their desire to be digitally connected, a passion they expect their favorite brands to share.

As in other e-pursuits, from reading the news to playing Angry Birds, the app has become the primary conduit of sales. Another study, by the St. Louis digital marketing firm Moosylvania, showed that more than 20% of smartphone owners had downloaded at least 30 apps —more than half of them for free. "The number of free apps on people's phones is an indicator that downloading them gets easier and more familiar every day," says Moosylvania's founder and CEO Norty Cohen.

The challenge is to reinterpret digital commerce for the luxury customer. The high-end home appliances manufacturer Jenn-Air has developed an app for the iPhone that lets consumers upload photos of their kitchens and replace their stoves and refrigerators with images of Jenn-Air products. Sotheby's International Realty's free app shows nearby restaurants, wineries, and other amenities with each property listing. "It's about tying into the consumer's lifestyle," says Cohen.

The fit can be less than seamless. The token of virtual shopping today is the blotchy, black-and-white, scannable square called a QR code. It is useful for beaming information about products straight from an in-store display or magazine page to customers' smartphone, but, Forshay notes, "QR codes were designed in Japanese automotive plants to keep track of parts. To translate that into luxury is a quantum leap." Special offers and price breaks that lure mass consumers have little power over the wealthy.

Instead, say mobile-marketing experts, what affluent shoppers value most is access. In a pioneering 2010 campaign, Burberry handed customers iPads which they could use to watch video of exclusive fashion shows and, if they saw something they liked, order items straight off the catwalk.

The best luxury digital plays, in other words, may be the ones most people never hear about. Forshay imagines stores pinging loyal customers to invite them to private trunk shows or to meet their favorite label's creative director. "You're seducing people with product, but also experience," he says. "You're taking them on a journey."

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